The Russian auto market has grown well over 2010. Sales for the first nine months of the year are up22%, while the major Russian automaker AvtoVaz has returned to profitability after suffering massivelosses in the wake of the global financial crisis. This return to profitability, combined with rosierprospects for Russian car sales, has led the Renault-Nissan Alliance to seriously consider increasing itsstake in AvtoVaz. While BMI is reluctant to endorse some of the more outlandish predictions for theRussian market, we do believe that growth in the Russian auto market will be one of the driving forces ofthe global car industry in coming years.
Auto sales in Russia have grown 22% year-on-year (y-o-y), to 1.51mn, in the first nine months of theyear. This development has led the Association of European Businesses to up its predicted full-yearforecast from 1.67mn sales to 1.8mn sales. Sales in October alone were up 62% y-o-y at 188,478 units.September saw yearly growth of 55%. In terms of brands, Kia Motors was the best selling with salesgrowing 59% to 87,345. Renault sales grew 26% to 75,158, Ford Motor saw a 1% drop in sales to69,885 and Hyundai Motor's sales grew 18% to 69,152.
Sales are unlikely to dip, as the government has extending a scrappage scheme, which was previously dueto expire on November 1. The incentive will be extended to some point in 2011. The quick rebound inRussian car sales is a good sign for the market as consumers feel more confident with acquiring the debtnecessary to purchase many of these cars. Some analysts expect the Russian car market to expand to 4mnsales annually.
In 9M10 AvtoVaz posted its first profits since the onset of its survival crisis, at US$20mn compared witha US$640mn loss in 9M09. The return to profitability is a significant milestone in the firm's recovery andhas likely played a role in encouraging Renault-Nissan's decision to increase its stake in the firm. Thefirm was tided over in 2009 by EUR1.67bn (US$2.28bn) in state aid from the Russian government and afurther EUR240 (US$328mn) from Renault. The firm delivered 367,765 units in 9M10, which is up36.5% from 9M09. Lada production represents 70% of the production at the Togliatti plant.Renault-Nissan is likely to acquire a controlling stake in AvtoVaz over in the near future. The head ofAvtoVaz, Igor Komarov, has said that he favours a further development in the relationship between thethree companies. AvtoVaz has had a troubled past, having lost over US$800mn in 2009. Renaultpurchased a 25% stake in AvtoVaz before the financial crisis and has since seen losses on its investment:US$168mn in 2008 and a further US$519mn in 2009.
However, despite this patchy history, Renault-Nissan is proposing taking a larger role in the troubledfirm. The Russian government has long pushed Renault to take a greater interest. The firm faced a choiceat the height of the crisis between providing new funds for the firm or seeing its stake diluted. PrimeMinister Vladimir Putin has said that he can easily see Renault acquiring a 50%+1 stake in AvtoVaz. It isexpected that Renault will purchase Troika Dialogue's 25%+1 share in the firm.